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Costing Systems - Coggle Diagram
Costing Systems
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Absorption Costing
All production costs
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Indirect manufacturing overheads including depreciation, rent etc
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Calculation
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Allocation Base: Budgeted or normal capacity (NOT: actual production, practical (ABC) or maximum capacity)
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Variances
Underabsorbed: Unfavourable
- Needs to process more of an expense
- Actual < Budgeted
Over-absorbed: Favourable
- System recorde too much
- Production > normal/budgeted
Non-Unit Allocation
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- Determine budgeted hours to make each unit
- Determine absorpion rate using 1+2
ACTIVITY BASED COSTING
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Activity
An aggregate of tasks, events or units of work that cause the consumption of resources
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RECONCILING PROFIT
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If sales = production, then there's no inventory change
If sales< production, inventory will increase
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If sales>production, inventory decreases
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